Morgan Stanley Analyst Adam Jonas looked at Tesla (NASDAQ:), and the wider market for electric vehicles (EVs) in light of mounting headwinds.

The analyst notes that the supply chain is under “tremendous stress” as inflation is weighing on demand and capital markets are “less ebullient.”

“Tesla had a strong 1Q, but have investors factored in the Shanghai lockdowns? We’d allow room in the forecasts for near-term disruption in China and slow ramps in Berlin and Austin,” the analyst said in a client note.

Also, he discussed the situations at Rivian and Lucid (NASDAQ;), where they were forced to prioritise growth over cost control. When it comes to Ford (NYSE:) and General Motors (NYSE:), the analyst asks “how can they spend cash they may not have?”

“Where will the battery metal come from? Many of the headline-grabbing EV targets set by OEMs didn’t take into account the price and availability of vital battery materials. At some level, material inflation has to impact demand. How does a 5x move in Lithium carbonate prices not impact affordability, and ultimately, unit volume?”

Jonas believes that EVs are a solid long-term investment. However, Jonas said there is the possibility of downside revisions to adoptions during mid-decade. The analyst is especially concerned about the “FY24/25 to FY30 time horizon.”

“While we believe many geopolitical and economic and technological forces will drive higher EV penetration over time, we feel there may be material room to ‘push down the curve’ for the near term to allow for a necessary re-architecture of the supply chain and expansion of capacity to bring EVs to the price point required to fulfill the higher penetration scenarios,” Jonas added in a note.

By Senad Karaahmetovic